VAT advice for friend?

[Steph86]

Hi geeks,

My boyfriends best friend has a small business, his turn over is nearing the VAT threshold.

He employs 1 person, has his over heads of rent, & stock. He likes to put most of his profit back in to the business buying stock. So isnt taking a big wage.

What are the pros & cons of being VAT registered?

Ive read on here VAT can kill small businesses, so I think he should make sure he stays under, but I'm not sure why...

My partner (never been VAT registered) thinks its a good thing to go VAT registered as then he can claim the VAT back?


Id hate to see his business go under.

Xx

 

[Trinity]

I think your friend would gain better insights by talking to a Business Specialist accountant, or at very least check out the HMRC website.

I believe there are pros and cons to both sides of the coin, as always in life, and I believe it can be quite specific to individual business, there is no sweeping right or wrong answer.

I wish him loads of luck, he's doing well in a tough economic time, it's lovely to see a small business flourish

 

[Steph86]

Thank you, yes he would... He isn't very business minded so to speak (although he is doing well) Id hate to see him end up in a mess.

Xx

 

[Elaine143a]

My salon luckily didnt need to be VAT registered, but my oh's businesses were. so can see both sides! IMO, if you can avoid it - I would! Total nightmare x

If your turnover is high enough, then obviously, you have no choice, and should be happy and willing to contribute - but if you are near the threshold, personally, I wouldn't register! Quarterly returns, ad hoc inspections, increased accountants fees, upfront VAT payments ................. horrible x

 

[BannerPenguin]

I'm VAT registered and I don't find it that bad to be honest.
I do most of my accounting myself which is only over seen by my accountant and if you have a good accounting program you simple click a button every quarter to give the the figures to type in online and pay. It isn't difficult.

However I would say if he can keep below threshold then it's not a bad thing however it limits any business growth.

He would have to take 20% of his income for VAT to include it in his current prices or add 20% on top to cover the VAT. But if he does lots of purchasing then he can claim all the VAT back on purchases which will offset what he has to pay of course. Swings and roundabouts.

 

[Steph86]

Thank you guys, yes it is a tyre business & yes he does as you'd imagine buy a lot of tyres.

So he would have to pay 20% of his income once he hits the VAT threshold quarterly, but in turn he can claim any VAT he has paid on products.

Thank you.

Xx

 

[BannerPenguin]

Thank you guys, yes it is a tyre business & yes he does as you'd imagine buy a lot of tyres.

So he would have to pay 20% of his income once he hits the VAT threshold quarterly, but in turn he can claim any VAT he has paid on products.

Thank you.

Xx

A client as well as my best friends dad has a franchise of a tyre fitting service. Mobile fitting service that is. He comes to you anywhere anytime etc.

Anyway - he is VAT registered but it's never held him back. I would say try stay below until you can push forward to be well over so you can keep expanding the business. Really he could have an extra employ etc if the works there to just do more tyres if possible.

He will also be able to claim back VAT on petrol, tools purchased, utilities, phone bill etc. All makes a difference.